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tv   Hearing Focuses on Robocalls and the Do Not Call List  CSPAN  May 24, 2016 7:56am-9:39am EDT

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all of us are plagued by unwanted calls even on our cell phones which is, i think, the point that ms. saunders was getting at. at the same time, you have legitimate companies that are facing needless lawsuits, and consumers are being denied information that they need. and i think what this cries out for a is balanced solution and your input today and testimony, i think, has been very helpful in elevating these issues and getting a discussion. frankly, for that matter, i thought hearing perhaps some common ground when it comes to, you know, the bad, the harassing, the bad actors and the good a actors, and perhaps we'll be able to find a way to come up with some solutions that reflect that common ground. so i want to thank you all very much -- >> mr. chairman -- >> yes. >> is it possible i could ask one more question, and that would be it? >> i kind of expected that would happen so, senator markey, one more question. >> and i appreciate that.
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and i know it's an unwanted intrusion. [laughter] >> never unwanted. [laughter] >> but i thank you. last year's surface transportation, the fast act included a provision requiring the irs to hire private debt collectors to collect certain unpaid taxes, attorney general. that means that the irs is going to be hiring many people to go after those who may be unable to pay their taxes. this provision, coupled with the tcpa carveout in the budget deal, will open the floodgates to private debt collectors, robocalling and row -- robotexting millions of americans. the enactment coincide with tax and debt collection scams as a serious problem costing americans millions and millions of dollars. last year bogus tax scams and fake debt collectors topped the better business bureau's list of
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top scams of 2015 with over 32% of all scam reports about phony tax and debt collectorsful so, attorney general, will these two changes in the budget and transportation laws on robocalls and robotext provisions make it harder for consumers to protect themselves from fraudulent tax debt collectors? >> well, there's no question looking at those two coupled together that there was this kind of interest. and, again, like the chairman said, it was put into the must-pass budget. so i think this idea of making the carveout exception really puts consumers at risk, because we've told people, you know, the irs will not call you. and don't worry if you do get the call. so this is not going to be a very effective tool to try to go after people other than the harassment that, if that's supposed to get things done.
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and i guess i would heat -- leave it that, again, this carveout is going to make the constitutional question about whether the federal government has now made winners and losers in an area which is really covered with free speech. so you may have really killed the whole tcpa by that carveout. >> yeah. so they become electronic, kind of luca bratz says as debt collectors. ms. saunders, do you agree with the attorney general? >> yes, i do. >> okay, thank you. i appreciate it, mr. chairman, very much. i think we should -- >> thank you, senator markey. >> -- tread carefully. [laughter] >> we do very much thank you for being here, taking the time and responding to our questions. and we will keep the hearing record open for two weeks during which time senators are asked to submit any questions for the record, and upon receipt we would ask all of you if you could submit your written answers to the committee as soon as possible. so thank you all for being here.
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this hearing's adjourned. [inaudible conversations] [inaudible conversations]
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[inaudible conversations] [inaudible conversations]
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[inaudible conversations] [inaudible conversations]
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>> virginia senator tim kaine, a member of the armed services committee, discusses cybersecurity policy and the importance of intelligence sharing today. he's part of an event hosted by the center for strategic and international studies, live starting at 8:30 a.m. eastern on c-span3. today house oversight committee chair jason chaffetz testifies on the conduct of irs commissioner john koskinen surrounding the irs targeting investigation. congressman chaffetz will appear before the house judiciary committee to urge the impeachment of mr. koskinen. you can see this hearing live, 10 a.m. eastern, on c-span3. this sunday night on "q&a," u.s. senate historian betty coed
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talks about the work her office does. >> i came in june of 1998 as a newly-minted senate historian. my colleagues, dick baker and ron ritchie, said to me, oh, it's going to be nice and quiet. you'll have lots of time to settle in and read and get comfortable in your job. and within a few weeks the house had decided to impeach bill clinton, and we got very busy very quickly and had to do a good deal of research on impeachment trials. we had not had a presidential impeachment since 1868, and the senate, the senate leaders at that time, trent lott and tom daschle, really wanted to follow historical precedent as much as they could. >> sunday night at 8 eastern and pacific on c-span's "q and a." >> for the past three years, the agriculture economy has weakened due to improving crop yields and lower global demand. next, the farm credit administration chair testifies before the senate agriculture committee.
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it's an hour, 20 minutes. >> i call this hearing to have senate committee on agriculture, nutrition and forestry to order. thank you all for coming. today's hearing will examine the overall climate of credit in rural america, the health of ag lending from both the commercial bank and the farm credit system perspectives and what the impact the current credit environment is having on our nation's farmers. we will also examine whether the farm credit administration is exercising appropriate oversight of the farm credit system. farmers and ranchers all across the country are experiencing difficult economic conditions as the farm sector profitability is
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forecast to decline for the third straight year. over the past three years alone, net farm income is expected to decline by 56%. as our nation's farmers and rural communities continue to deal with low commodity prices and always elevated input costs, access to affordable credit in rural america is absolutely crucial. the spring 2016 agriculture lenders survey released by kansas state university's department of agriculture economics expects the credit environment for farmers to remain difficult for at least a few more years. lenders indicate that demand for operating loans will continue to remain high as liquidity cash flow are problematic for many farmers. further, nonperforming loans
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have increased and are expected to continue in this unfortunate trajectory due to low commodity prices. in addition to the lender survey, the federal reserve bank of kansas city painted a similarly bleak projection that the farm sector credit conditions for the first quarter of 2016, lenders note an increasing share of farmers carrying over outstanding debt from previous years with an increased demand for loans and weakening repayment rates. now, for farmers every year, every year is a high stakes bet as they put their confidence in their crops, livestock and the business decisions they make all throughout the year. while farmers continue to manage their risk through a period of low commodity prices and stubbornly high input prices, it is vitally important we begin discussions regarding next year's borrowing decisions. there's no doubt that today's discussion is timely, especially considered it has been just
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under a decade, ten years, since we have had representatives from either the banking industry or the farm credit system before this committee to discuss some of the issues we will cover today. rural america relies on a network of credit providers or consisting of the private sector and the farm credit system. created under the federal farm loan act of 1916, the farm credit system is a nationwide system of privately-owned, cooperative lenders, statutorily required to provide farmers and other rural borrowers with a permanent and affordable source of credit. currently, the farm credit system is comprised of 74 agricultural credit associations and four regional banks which provide the ag credit associations with funds to make loans to producers and other retail borrowers. the agency tasked with regulating the farm credit system is the farm credit system administration or the fca.
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the farm credit administration is an independent agency comprised of three, a three-member board nominated by the president. and as we all know on the committee, confirmed by the senate through our committee. like the banking industry, the farm credit system is not a lender of last resort. the lender of last resort for farmers who are otherwise unable to secure private financing is the department of agriculture's farm service agency. our commercial banks and the farm credit system -- pardon me, service often relies on usda farm loan guarantees to make loans when borrowers are less creditworthy. now to date, the farm service agency has seen a 21%, that's 21%, increase in farm loans as compared to last year. a further troubling indication of a struggling agricultural economy.
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obviously, much has changed since congress established the farm credit system a hundred years ago. one thing that has not changed, however, is the importance of providing farmers and other rural borrowers with easily accessible and affordable credit. now, i along with a few members of my colleagues on the ag committee here remember very well the difficult times for the farm economy during the 1980s. no one, no one wants to see a repeat of those dark days. so i look forward to hearing from our two distinct panels of witnesses regarding the landscape of the current economic conditions in farm country, what is working or needs improvement from the legislative perspective to protect financial well being of our farmers and our rural communities. now, before we hear from our witnesses, i recognize our distinguished ranking member, senator stabenow, for any of her opening remarks. >> well, thank you very much,
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mr. chairman, and thank you to our witnesses as well as the leaders from the farm credit administration. it's great to see all of you and, mr. chairman, this is a very important hearing, to is thank you for holding it. i want to especially welcome mr. on the sayinger, mr.-- tonsager, mr. hall who was unanimously approved last year. it's wonderful to see you again. and i also want to give a warm welcome to judd welder who will be on our second panel, judd served in both the united states marine corps and u.s. army, and he and his wife are now the proud owners of trinity farms in greenville, michigan. it's great to have you here today, and thank you for your service to our country and for taking time away from planting corn to join us and tell your story. as many of us know, a hundred years ago, as the chairman said, in 1916 congress passed the federal farm hone act to address -- farm loan act to address the serious problems facing our farmers and
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agricultural producers, a problem that threatened the long-term success of our rural economy. at that time obtaining reliable credit was often unaffordable in most rural areas. many lenders avoided farm loans altogether because the inherent risks of weather and price swings made lending to farmers unappealing. as a result, congress established the farm credit system to fill gap many credit -- in credit and provide american farmers and producers the financing they needed to expand in good times and to weather the bad times. a hundred years later the farm credit system continues to insure that producers of all types and sizes have adequate and reliable access to credit. in fact, farm credit lenders nationally provide more than $200 billion in loans to rural america. in my home state of michigan, greenstone farm credit provides more than $5 billion in loans to producers including to more than
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17,500 small, new and beginning farmers that need access to capital. and as we will hear there mr. welder, it was exactly type of support that helped him secure land and create a new life for himself and his family after his military service. however, as we look ahead to the next several years, we know that we are in a period of low commodity prices. especially compared to what we have seen in the past few years which will make it more challenging for farmers to make ends meet. this year alone net farm income is projected to decline for the third consecutive year, a drop of 56% from 2013. and thank goodness, mr. chairman, we did the farm bill. to weather this downturn, american farmers will continue to rely on commercial banks, usda and our farm credit system to provide the necessary short, medium and long-term financing that will allow american
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agriculture to continue and prosper. i'm pleased that we'll also be hearing today from lenders on our second panel who play an important role in providing credit throughout the entire food supply chain. i would also like to briefly mention the longstanding support of the farm credit system by senator pat leahy. i understand that he's in an appropriations committee meeting and will be unable to a attend today -- to attend today. but, mr. chairman, as chair of the committee during the 1990s when many important reforms were made to the farm credit system, senator leahy has asked me to submit for the record a transcript of his and then-ranking member lieu ger's floor states during consideration of one of those major changes, and i would ask the chair to enter that into the record. >> without objection, so ordered. >> thank you, mr. chairman. >> mr. chairman? could i welcome a south dakota witness? >> i would be delighted to have
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you do that. coop, why don't you go ahead. >> dallas tonsager has a farming operation in northeastern south dakota and someone who has a great, distinguished career in public service. thank you for being here and welcome to committee. give your family our best, all right? thanks, dallas. >> thank you, senator. today i'm pleased to welcome our first panel of witnesses who represent the farm credit administration led by our chairman and ceo, the honorable kenneth spearman. mr. chairman, we appreciate your joining us. while you recover from a a medical procedure, note that you're under doctor's orders to wear your cha poe, i think that's the proper term. as i told you in the back room, i was going the give you a black cowboy hat. [laughter] a cowboy hat as we say in dodge city.
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but we don't want this to be a hearing with black hats, so -- [laughter] but you're permitted, and you're looking good. mr. spearman appointed to serve on the farm credit system board by president obama, october 13 of 2009, has an extensive background working in finance agriculture cooperatives from 1980-1991. mr. spearman served as controller of a 100 million citrus co-op in orlando where he handled financial management reporting and supervision of taffe accounts. after serving in this capacity, mr. spearman went on to become director of internal audit for florida's natural growers and outside director on the ag first farm credit bank board until his appointment to the farm credit administration board. mr. spearman is also a u.s. army and vietnam veteran. we thank you, sir, for your service. mr. spearman, thank you for your service to our country, i look
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forward to hearing your testimony today. after i introduce your fellow board members. our next witness on this panel is the honorable dallas tonsager, already introduced by my distinguished colleague. mr. tonsager brings decades of experience working on issues concerning farm credit in rural america and is now on his second stint serving on the board of the farm credit administration. in addition to being a board member of the farm credit administration, mr. tonsager serves as chairman of the board of the farm credit system insurance corporation which is responsible for insuring the timely payment and principal interest on obligations issued on behalf of the farm credit banks. before being nominated by president obama to serve on the farm credit administration board, mr. tonsager served as usda's undersecretary for rural development from 2009 through 2013 where he works to expand broadband and other critical
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infrastructure projects all throughout rural america. mr. tonsager hails from south dakota where he grew up on a dairy farm. it's a pleasure to have you back before the committee, dallas, and i look forward to your testimony. our third witness on the panel is the honorable jeffrey hall. mr. hall was appointed to the farm credit administration board by president obama on march 17 in 2015. prior to his appointment, mr. hall was president of association management and consulting firm he co-founded in 2009. before working mt. private sector, mr.-- in the private sector, mr. hall was the kentucky state executive director for usda's farm service agency where he was responsible for farm program and farm loan program delivery and compliance. and was a scout for the university of kentucky's basketball team, as i understand. i made that up, so you can -- [laughter] prior to his time in the d.,
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mr. hall served as an assistant to the dean of agriculture at the university of kentucky and previously served as a senior staff member to our majority leader, mcconnell, from 1998--- 1988-1994. jeffrey, thank you so much for joining us today. i look forward to hearing all three of your testimonies today, asking you some questions about the state of the farm credit system. mr. spearman, why don't you kick things off. >> thank you, mr. chairman. chairman roberts and ranking member stabenow and members of the committee, it is a privilege to the appear before you today to report on the mission of the farm credit administration. i have a written statement to submit for the record. president obama appointed me to the fca board in october of 2009 and designated me fca chairman and ceo in march of last year.
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i have the pleasure of serving on board with two very distinguished colleagues, dallas tonsager and jeff hall, from whom you will hear from in a moment. fca is an independent federal agency that regulates and examines the banks, associations and related entities of the farm credit system including farmer mac. our responsibility is to insure that the system meets its congressional mission to provide a dependable source of credit for agriculture and rural america. fca was created by an executive order of president franklin roosevelt in 1933. during the agricultural credit crisis of the 1980s, this committee restructured fca, giving it regulatory is and enforcement powers similar to those of other federal financial regulators. , this ca is -- fca is not an
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appropriated agency. we are funded primarily through assessments paid by system institutions. the farm credit system is the nation's oldest government-sponsored enterprise. it is a nationwide network of borrower-owned, cooperative financial institutions. currently the system includes four banks and 74 direct lending associations. the banks provide loan funds to associations which in turn provide operating loans and long-term real estate loans to farmers, ranchers and other eligible borrowers. one of the systems banks is also, has the authority to lend to agricultural cooperatives and rural utilities. farm credit banks and associations cannot take deposits. the system obtains loan funds by selling securities on the national and international money markets. the securities are not guaranteed by the federal
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government. the system is the only gse that makes loans at the retail level. it was established to provide a dependable source of competitive credit to farmers, ranchers and farm cooperatives. its mission is to serve american agriculture in good times and bad. and now, after several years of record farm income, agricultural industry has entered a new period of lower profits. in 2016 net farm income is forecast to decline for the third straight year. times like this underscore our nation's need for dependable, affordable agricultural credit. because congress had the foresight to establish the farm credit system some 100 years ago, our farmers and ranchers have been able to provide abundant, affordable food and fiber to people at home and around the world.
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of course, stress in the farm industry can also create stress for the farm credit system, and we are already seeing signs of stress in a few institutions. however, i'm happy to report that system banks and associations are fundamentally safe and sound as is farmer mac. and fca is taking steps to make sure the system remains safe and sound. the board recently finalized a rule that updates our capital regulations and aligns them with the basel iii accord. we continue to emphasize robust internal controls in all system institutions and to monitor for emerging risks. regarding the system's authority, we have taken steps to insure that it uses this authority only for the purpose of mitigating risk and, as always, if we find a transaction that is outside the limits and
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purpose of the law, we require the institution to take corrective action. we also emphasize mission fulfillment. the system must serve all eligible, credit-worthy, potential borrowers regardless of race or gender and regardless of the commodities they produce or the size of their or operations. we want to make sure is the system also serves small organizations and operations that produce organic and value-added foods for local markets. mr. chairman, this concludes my opening statement. thank you, and i'll be happy to answer any questions. >> mr. tonsager. >> chairman roberts, ranking member stabenow and members of the committee, thank you for the opportunity to testify today. i'm pleased to now be serving a
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second term on the board of the farm credit administration with my distinguished colleagues, chairman spearman and board member hall. i have previously served on the fca board from 2004-2009. at the outset, i want the committee to know of my absolute commitment to the continued safety and soundness of the farm credit system as we navigate through the downward cycle in the agriculture economy. rural america and the farm credit system are important to me both in my role as an fca board member and in my personal connection to farming and rural america as i was raised on a farm in south dakota and was engaged in farming for over 40 years. the farm credit system, which is cooperatively owned by farmers and ranchers, was well positioned to persist through the 2008 financial crisis. in fact, the system's capital and liquidity positions, risk profile, stress testing capacity and lending practices in the agricultural sector have all significantly strengthened over the last eight years. with the challenges now facing
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the agricultural economy, fca's oversight role and farm credit system's purpose to be there for agricultural producers in rural communities in bad times as well as good times are more critical than ever. i lived through the difficult years in agriculture in the 1980s and well understand the importance of the farm credit system to farmers and ranchers in such times. i have great confidence in the fca's ability to insure that the farm credit system institutions remain a source of sound, adequate and constructive credit to those farmers and ranchers struggling to keep their ag operations going and remain in their rural communities. in addition to my duties as a farm credit administration board member, i serve as chairman of the farm credit insurance corporation along with my colleagues on the fca board. congress created the insurance corporation to insure the timely payment of principal and interest on the debt issued by the farm credit system banks. congress also gave the insurance corporation the responsibility to provide assistance to
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troubled farm credit system institutions and to act as a conservator or receiver for failed system institution. by law the insurance fund must remain a secure base amount equivalent to 2% of the adjusted insured obligations of the system banks, and there is currently $4.1 billion in the insurance fund. an amount that is marginally under the secure base amount. this fund acts as a safety net in addition to the protections afforded by joint and several liabilities agreements of the system banks. that concludes my opening statement, thank you to the committee, and i look forward to your questions. >> mr. hall. >> thank you, mr. chairman, ranking member stabenow and members of the committee. my name's jeff haul, and it was -- jeff hall, and it was a little over a year ago i sat before this committee, and i appreciate the chance to come back today as a board member of the farm credit administration.
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farm credit administration is an independent regulator of farm per mac. our agency examines institutions for their safety and soundness and compliance with laws and regulates. fca exercises increased oversight with institutions at a higher risk. the farm credit system was created to provide a permanent, reliable source of credit to u.s. agriculture. when congress enacted the federal farm loan act in 1916, credit was not always available and affordable in some rural areas. many lenders avoided farm loans due to the inherent production and price risk of agriculture. the foundation of the farm credit system is its cooperative structure. agriculture has changed in many ways and will continue to change, but the guiding principles of the cooperative model continue to stand the test of time. member ownership and gore nance are a key ingreed end of the system's -- inbleed -- ingredient of the system's success. due in no small part to the actions of this committee.
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during the agricultural credit crisis of the 1980s, congress made some very important changes to the system that gave it the opportunity to emerge stronger and better able to serve rural america and meet its mission. a as you well know, farm income is projected to decline for the third consecutive year. virtually all sectors of commodity prices are lower than anytime in the past five years. farm debt continues to increase, and many farmers and ag businesses have been forced to draw from the equity they had built. fortunately, agriculture has entered this down cycle from a position of strength with historically low interest rates helping to hold down debt levels. there are challenges ahead, but it is well situated to remain a reliable source of credit. chairman roberts told me as i sat at this table a little over a year ago to get outside of washington and go meet people in the system. i have priortized my travel to meet with borrowers, association boards and employees who are dealing with these challenges on a daily basis. also my visits i learn about the
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consequences of the rules and regulations imposed by the farm credit administration. my visits have helped me greatly in my role as a board member. without the input, my job would be much more difficult. i like to say we will not always agree, but i will always listen. at our march board meeting, the farm credit administration board approved the new capital rule which will require the system to hold on to more and higher quality capital. by raising the capital requirements, farmers' investments in their associations is better protected. the board also adopted guidance to the system on the use of similar entity lending activity. i understand the reputation risk is a valid concern and adopting this guidance will increase the examines and reporting requirements -- examination and reporting requirements. it gives fca another tool. it also gives us an indication whether additional guidance from this board is necessary. both the capital rule and similar entity guidance are good examples of the additional focus on internal controls.
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from the beginning of my term, chairman spearman has made internal controls a stated priority. modern agriculture and the financial service industry is more complex than ever. the administration and the system will continue to strengthen the internal controls in order to carry on the legacy of service to american agriculture in rural communities. thank you again for inviting me to testify. there are many challenges that face the system. having been a federal land bank borrower in the 1980s, i can say with confidence that the system is much better and stronger than it was 30 years ago. i don't consider myself an advocate for the farm credit system. i do consider it my responsibility to assure a safe and sound source of credit to eligible borrowers and owners of the cooperative. the agency is doing its job as a regulator, and benefits of a dependable, competitive source of credit will help bring prosperity to rural america. thank you, mr. chairman. >> thank you all again for appearing today before our committee and for your
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statements. mr. spearman, the reports i cited in my opening statement by the kansas city fed and the can kansas state university paint a very bleak economic picture for farmers all throughout the country. i don't like saying that, and you probably don't like agreeing to it. now, i served in congress in the 1980s during the last farm crisis, the big one. and i am confident that nobody, nobody wants to see a repeat of those tough times. today what are the conditions of the farm economy, and how do they differ from those present 35 years ago? i am hopeful they show we are not headed for another crisis. be and even more importantly, what safeguards are in place to insure that our farmers are protected in the event we do see two, three, four, five more years -- i hope not, but if that is the case -- of low commodity prices?
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>> the, mr. chairman, thank you for that question. had to push the right button here. the farm credit system, as the three of us all stated, is well capitalized at this time. it's well positioned, if you will, to withstand the possible downturns in the economy, agriculture economy that are loom. capital position is very strong. there's 16% capital, if you will, with $48 billion or so roughly in capital. the asset positions are strong new -- through the system. the managements that were, that are currently at the institutions are i don't want to
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say a lot better, but they're kind of more informed, i think, today than they were back in the 1980s. the earnings are, work very well in the system. as you can see from our financial statements. and liquidity ratios are over the top. in fact, they're more than twice what the regulations require of 09 days. -- can 90 days. so i think that the system is well positioned again to withstand any downturn. of course, there could possibly be some black swans out there that we're not aware of, but we have systems in place at the agency to keep us abreast of what those might be, and as an agency, we will take, we will
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take measures that will end up protecting system more. thank you. >> i appreciate that, mr. spearman. mr. tonsager, your role as chairman of the farm credit system insurance corporation is to insure proper maintenance of the farm credit insurance fund in order to safeguard the timely payment of principal and interest on the debt issued by the system banks. this funding comes from a collection of premiums from system banks. as you noted in your written testimony in 2013 when time were pretty good, the farm credit system insurance corporation and the federal financing bank entered into a $10 billion line of credit agreement. please explain what financial conditions within the farm credit system prompted this decision when we were in a much better situation, and what authority exists allowing the insurance corporation to take out this line of credit? >> the line of credit can only
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be used in times of economic emergency for the united states in general, not for agriculture specifically. it is a liquidity line designed to assure the flow of capital to the farm credit system should there be an event similar to 2008 that might occur again. and we, so we simply cannot use it unless the federal funding bank agrees with us that it cannot be used in the event that the system fails to fund or properly manage itself. it can only be used in those emergency occasions. similar lines of credit are available to the fdic and to the national credit union administration. so the agency at that time felt it prudent after watching what occurred in the 2008 time frame to make this line of credit available and to have it there to assist us should there be a
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liquidity event within the markets. >> well, that was not only prudent, but you're a prophet. these rather bleak times we're in. i appreciate that. let me ask a question of the full panel, so anybody is welcome to answer. don't be bashful. one of main criticisms we hear about the farm credit administration is that fca's oversight of system lenders' loans is not thorough enough, that loans are being approved that fall outside the system's charter or scope. how do you respond to that criticism? and furthermore, how does the farm credit administration execute its regulatory duties to insure that system members are able to serve farmers but in a way that complies with the statute? feel free. >> mr. chairman, what you may be
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referring to there is the similar lending process that the system is involved in. this was a practice that was included in the act in 1992 as a risk mitigator. there are, one of the primary criterion for participating in that program is that they be ineligible loans that are functionally similar. there are limits, if you will, on what the participation that these institutions can involve themselves in these type of loans, and the agency drafted and approved a book letter to provide guidelines, if you will, for the system to the actually
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update their procedures and get more approval from the board on any of these loans that are entered into. and the book letter also addressed the possible reputational risk involving themselves in these type loans. >> i appreciate that. mr. hall, in your testimony you talked about a capital rule recently approved by the farm credit administration board this past march. just a couple of weeks ago. can you expand a little further on this rule, the rationale for approving it and explain what you hope it will accomplish? >> the primary goal is to make the system more comparable to other banking institutions. our money comes from wall street, and when you have common terms and common factors that people on wall street look at
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buying our paper or buying the system's paper, this capability was an important step. it's a program that i think agency has been involved in for about three or four years proposing rules, and in march we were able to actually approve the board, the board approved the adoption of that rule. >> i appreciate that. senator stabenow. >> thank you very much, mr. chairman. and, again, thank you to all of you. i wonder if you might just expand a little bit because of i'm sure we're going to hear more about similar entity authority and some of the high profile cases that there have been concerns raised about if you could expand a little bit more on steps that you've taken to address that. and, againhow, how this mitigates risk from your perspective. and any of you are welcome to answer that. so, mr. spearman?
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>> okay, i'll start, senator. thank you. as i mentioned previously, some of the steps that have been taken have been to raise a heightened, if you will, awareness that these type loans may create some controversy. there's -- the act does permit these type loans as a risk mitigator, and the way that it does is that the system is a monolewin lender -- monoline lender, if you will, so they have to be there for agriculture in good times and bad. there's, the guidelines that we've put out in our book letter is that the board needs to be more involved in these type loans and that the policies and procedures are examined by our
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examiners to make sure that they've, that they've been updated and that there's, the institutions are keenly aware, if you will, that these are controversial type loans. >> would anyone else like to respond? yes. >> yes. thank you, senator. i'd just like to mention that congress over the years has provided several elements within the farm credit act that require banks and the farm credit system to work together. and this is one of those elements. for every dollar that is invested in a similar entity loan, there's a dollar from a private banker. these loans cannot be done without a private banker involved with it, and there has to be at least a 50% involvement by another party other than the farm credit system. so i believe there's been, you know, there's some misunderstanding about these kinds of loans. they've been authorized for
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many, many years. they include for cobanks' perspective, they can do communication loans, utility loans and other types of loans. so you not only broaden the capacity of the system, you strengthen the relationship with bankers in this particular area and other areas of the system. there's literally billions and billions of dollars done together with the banking community each year and thousands and thousands of transactions between the farm credit system and banking. >> thank you. mr. hall, did you want to add anything? >> the only thing i would add is sort of the reason behind the similar entity lending back in the '90s was it allowed the institutions to broaden their risk and base of risk. and so they are functionally similar. they are not eligible loans. so i think that's where some of the confusion comes in. but i think that we have monitored as an agency similar lending activity. we've asked for additional oversight of that, and we will
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continue to monitor as an agency to make sure it's proper and appropriate. >> thank you. changing a little bit to a different area of concern in terms of risk in agriculture, and that's the decline in the total number of farms which is, certainly, something that we're all concerned about. according to the usda from 2014 to 2015, the united states lost more than 18,000 farms and over one million acres of farmland. so i wondered if you would respond to me. the trend and the average age of the american farmer as in all of our areas in the economy, the average age is 58 years old. so i'm wondering if you might peek to and describe -- speak to and describe some of the work that your institutions are doing to support new and beginning farmers which are very, very important, obviously, to all of us. mr. spearman? >> thank you. thank you, senator, for that question.
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yes. the ybf program that you alluded to was a program that was added to the act in the early 1980s. and it was added with the, with the purpose of providing a vehicle to bring young, more young, before beginning, if you will, and small farmers into the agricultural sector. some of the provisions that are provided under that act is that, that part of the act is that there could be lesser interest rates charged, if you will, in the underwriting process. education is provided for those folks who are not very familiar with some of the operations of agriculture. and also it's -- we've passed a
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book letter, if you will, that encouraged farmers who borrow from the system there to be more involved in, with the youth aspect of farming. and the lenders are -- the book letter addresses the fact that the systems who actually lend the money actually survey their territory and make sure that they are addressing underserved, if you will, folks within the territories. >> thank you. would anyone else like to respond to the role that you have with new and beginning farmers? yes. >> madam chair? i think it's been for the systems mission a significant success story to look at the data that's been accumulateed regarding the growth in those loans in those areas.
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and i think the system has taken very seriously in my discussions with them the requirement to do this, and they have taken it to heart and actually adepress uly pursue -- aggressively pursue this program. they each have their own programs designed for their region. we examine for them to execute those programs. the report is given to us each year, and we in turn report to congress about the results of that effort. >> great. mr. hall, did you want to add anything? >> just one comment. based on my previous e peens working -- experience working with farm service agency, i note there are a lot of partnerships on guaranteed programs that are available. so i know the system is very active in working with oh partner -- with other partners in making sure that the best population is served. >> thank you, mr. chairman. >> you through? senator tullis. >> thank you, mr. chairman. i'm going to ask a different
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question. first off, i'm from north carolina. we have a highly diversified farming community, and some are doing pretty well right now, others are not doing so well. and just want to echo that we need to be careful if this continues, we could see greater numbers of farmers harmed over time if we don't kind of get things on track. and what i want to do is talk about some of the future risk i. may seem odd asking this panel about gmos, but have your, are your people looking ahead and seeing, for example, we've got a discussion right now about maybe a fix for gmos here. if we don't fix it, then people like kelloggs and campbell's, a number of major producers of food, are going to start reformulating. so over the next two years, sugar beets will end in favor of cane, cane sugar. over 90% of all the corn grown in the united states is a
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product of gmo. i don't know what campbell's is going to do to replace that in their soups. same thing, i think, to a certain extent with white potatoes. i happen to grow, from north carolina, 50% of all the sweet potatoes grown in the united states are grown in north carolina, 70% of the exports are from north carolina, and none of them are a product of gmo. so i assume that maybe campbell's will decide to replace white potatoeses with sweet potatoes. good for me, not necessarily for the potato-growing states. the point i'm making is this represents a major risk in terms of demand over the very near future. have you all looked at that in terms of your portfolios to get any idea what it means if you completely shut demand down for a certain commodity, say sugar beets? >> senator, very good question. we, what we do as a safety and soundness regulator is to try
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and exam all risks. we -- examine all risks. we do have economists on staff who report to us regularly -- >> have they ownage sis on the particular policy that if congress doesn't act, the near, intermediate and long-term effect it'll have on some of these commodity producers? >> well, they analyze all risks within the system. some known and some unknown to others -- >> would it be possible for my staff to get in touch with you all to see what extent they recognize the impact on the -- the trend, what will happen among the campbell's and the keg olds and the major -- kelloggs and the major food producers. they will reformulate. instead of sourcing sugar beets grown in the united states, they'll source from other parts of world. they will find other sourcing inputs. and that will have a devastating impact on commodity prices that today, unless they've taken that
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analysis into account recognizing this reformulation's start right now, it will start on steroidsed in july and august time frame, and it will be -- it's not one of these five or ten-year market disruptions. this is probably a one or two-year market disruption. so i'd be very interested in getting any analysis on how that would affect the portfolio of farmers who are in the crosshairs of these target commodities. there's no question in my mind that the major food producers are going to reform late to the maximum extent that they can. and when you're talking about commodities that are in the 90th percentile in terms of gmo products -- safe products, i might add, at least according to the fd a a, the department of agriculture and the epa -- what are they going to do? who are they going to sell that to? and if they do sell it with the demand being down, to what extent does this affect a portfolio, a financial portfolio out there in terms of their
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ability to pay their bills? i don't expect you to answer that question now, you probably didn't expect to get that answer and, frankly, when i came into the room, i didn't expect to ask the question. [laughter] but that's dependent on congressional action or inaction, and i think it's something that you need to look at, because that is a potential looming crisis for some of the farmers out there. and i'll just, if i may, we'll follow up with questions to the agency so that we can get specific information on how this could be destabilizing to the sugar beet growing state, the corn growing states, the soybean growing states. i mean, it's an equal opportunity disrupter, and i think we need to get some financial information behind i. thank you. thank you, mr. chair. >> let me say before i recognize senator bennett on behalf of the ranking member, our distinguished ranking member, that the responsibility and
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requirement that mr. tillis just raised with regards to agriculture biotechnology, note the difference. as opposed to gmo, this is called agriculture biotechnology, abt. it's a good question, and it's a challenge that the farm credit system ought to be thinking about as well as every lender that we have at our disposal within the world of agriculture that responsibility is right here in this committee and also right in the, in the senate of the united states. the house has acted. we will act. the distinguished ranking member and myself and staff have been working overtime to try to come to an agreement that we could bring to the floor where we could get 60 votes. but i think mr. tillis' admonition is a very good one, more especially to everybody in the farm lending field.
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reformulation is a pretty fancy senate word for we ain't gonna guy what you're selling, and that is happening today as we speak with the sugar beet producers. and so we know that we, that we must act. everybody on this committee knows we must act. and i want you to know that, but i also want you to know that mr. tillis has raised a very, very important point. >> yeah, mr. chair, if i may, it's just that we need to put a face on who's affected by this policy, and it's farmers. it's farmers that are already, they've got crops in the ground now, they've got plans to put crops in the ground next year. the big businesses will find out what they can buy to avoid what i think is ill-advised policy, the first evidence of it is in vermont. they will be able to make the change because they have the resources and the reach to do it. the farmers don't. thank you, mr. chair. >> senator bennett.
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>> thank you, mr. chairman. thanks for holding this important hearing. and i wish you and the ranking member well in your negotiation. time is not on our side, so -- and i want to thank the witnesses for being here today and for your prudent oversight of the fca. mr. chairman, you said that the mission of the fca is to serve farmers and ranchers in good times and in bad times. as heart attack has been said -- as has been said, farmers and ranchers across the country are facing hardships spurred by low commodity prices. in colorado overall costs of farming have increased year over year and are forecasted to increase next year as well. on top of that persistent drought conditions have added extra volatility which makes it clear to me that farmers need all available options when it comes to lending. the farm be credit system was designed to mitigate against these fluctuations and the risks posed by farming and ranching. i wonder whether you could talk
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about, describe the role of the farm credit system particularly in tough economic times. what role it plays in rural communities facing these economic hardships. i'd be happy to hear anybody on the panel address it. >> sure. thank you, senator. i think that the obligation, i think, was made clear to us in the 1980s in the struggling time we had back at that time that there needed to be a level of strength and commitment. and in rural america these are farmer-owned cooperatives. so these farmer board members are extremely committed to their communities, and and that's number one, that basic governance that occurs within that. i think the system has an obligation to make sure the system remains safe and sound. that is a reliable lender through that time, but it also as an obligation to make sure to work closely with producers x. i think they've developed pretty good strengths in their loan officers and how they work with
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clients and how they make sure they get the best opportunity for financing. so i think that financial strength of the system and the capacity of the system in their lending and working with producers is going to make a lot of difference. in the '80s we saw a lot of producers that simply couldn't get the credit they needed at the time, or they were overextended credit. and so their income was replaced by credit, and they lost ground. and so i think one of the critical elements of this is how loan officers both in the farm credit system and the private sector work with those individual producers and help them recognize the circumstances they're in, fund them if they possibly can or help work with them if it becomes too challenging. it's a tough, tough thing that happened at a time we lost thousands of producers, and many of them were fundamentally, personally harmed in the process of doing that. and additionally, i'd like to add there's borrower rights in this.
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the law requires that the farm credit system provide rights to borrowers in an event they're foreclosed on. so by law, a process must be followed with individual producers when the time comes to make decisions about their credit. >> thank you for that thorough answer. is it thorough enough? i'll ask a second question then. last year colorado producers exported more than $1.8 billion in farm goods to countries around the world. some farm credit institutions like cobank, which is headquartered in colorado, are engaged in export financing to support producers as they look to markets abroad. can you talk a little bit about the sort of growth that we're seeing in export financing for ag in this country? >> i think part of the change we've seen is previous usda programs like gsm programs have been replaced or substituted with other private credit funding, and i think the ability
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for cobank in particular to step up and add that kind of financing option helps improve the export market. obviously, when you're dealing with billions of dollars, you're going to have to have some line of credit to be able to participate in the international markets. >> it's becoming increasingly an important part of our rural economy, these exports. 80% of the wheat that's grown in colorado is exported from colorado. our dairy's exported as well. we're looking to open up these new markets, and this can help. thank you, mr. chairman. >> i want to remind members that we will soon have three votes. we're going to keep the hearing going bilaler the nateing who holds -- by alternating who holds the gavel. senator ernst. >> thank you, mr. chairman. thank you, gentlemen, for joining us here morning. i'd like to talk about different groups that might be getting funding through the fcs, groups like veterans or other minority groups. are there, are there certain
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areas that maybe you target or would like to see more participation whether it's women farmers or ranchers? if you could delve into that a little bit, maybe talk if you've got some of those programs where you're looking at veterans or others that want to get boo farming, ranching, any opportunities that we might be able to express to our constituents. and mandate it, if you will, that the institutions look at
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their system, look at the area that they operate in, the districts and because the mission of the system is to serve all, will qualify credit where the folks. the system is doing that and we are examining and we are definitely seeing a lot more improvement, particularly on veteran also. >> thank you. i appreciate that. any other thoughts or examples? >> i would like to say the mci board has been learning itself. we traveled together on the indian reservation last year to ask where the challenges in indian country and got great experience from that. >> very good. >> i visited texas a few months
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ago and the young producer didn't have much agriculture experience but has become very successful as a borrower of the farm credit system. he was complimentary of the report he receives in the other educational programs available. i'll also mention another example closer to home from kentucky. a young lady who used to be an employee of the farm credit system. she and her husband are vaulted locally grown community supported agriculture and recently recognized as one of the women of the year. they are great examples out there. i will say there's always more we can do. >> very good. i appreciate your work with others that might have challenges. i think it is really important at the opportunity exists out there for them. thank you for doing that. senator had brought up an interesting bed, and read gm is, whatever the termite he that made this i.t. is for different types of commodities.
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it does create a wrinkled up there, whether you face challenges the legislation, with drought or other natural disasters. what you really can't plan for or predict. with the outlook of the ag economy over the next several years, what are the steps that you can take within the credit system to prepare for that? maybe you could explain how that works. >> well, senator, and as the safety and soundness regulator, we try to examine and anticipate all risks that may have been. in fact, our examination, are risk-based, we try to look at what problems that might be on the horizon and we try to develop rules, if you will and
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regulations that would help us to do a better job, to make sure that the system remains safe and sound. >> are you able to adapt quickly in those situations if the rules are going through the board, you know, reacting to the situation on the ground, whether it might be a drought or other crisis that you may see. >> well, quickly kind of relatives i'm not fast enough for me, personally, but we do spend time with it and we do try to plan and see if we can do a better job in helping to stress the areas. >> very good at thank you, gentlemen. my time is expiring. back to the ranking member. >> thank you very much. senator casey. >> thanks very much. i will thank you for your testimony and chairman spearman, i wanted to commend you on the
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answer that you gave about beginning small, young and small farmers and the work you're doing there. i wanted to also raise a question about some of the new risks for new challenges that you face. i know you have a lot of evidence in light of what happened in the 80s than the difficulties then that you can learn lessons, that you can apply. because technological innovation and both a technology based on the financial and ag system we have now, to some of those lessons may not apply because of the technology and other strategies have changed. and might in fact, if that is true, and might at that, how do you assess some of the risk he
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will make going forward that might be more based in the limits of the technology based upon other challenges posed to the old 1980s that were encountered then? >> as i mentioned previously, our examination are risk-based. our examiners make a determination as to where the greatest exposures might he and our resources are pretty much concentrated in that area. you bring up a very interesting point there about technology. you know, cyberkinds of threats now are very apparent in almost all sectors of our economy. one part of our examination is to spend time in the i.t. area with the institutions that are being examined.
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and if issues are found, corrective action is mandated. >> when you encounter those and bring them to our attention, and ask for resources where appropriate. i also wanted to raise a question regarding when uss the credit stress level in the system's portfolios well within risk or in the capacity, but also when you reference in grain prices will experience moderate on growth.
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>> one of the points we look at when we make determinations for where to focus our efforts what's going to be anticipated into the allowance if you will for the entities that are being examined. and because of payback that have a deleterious effect if you will we would indicate to the
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institution that they may want to look at their underwriting to the standards they are because there may be something there that they are overlooking when they let alone. >> we appreciate that. i'll have some questions for the record for other witnesses in the interest of time. thank you very much. >> senator brown. >> thank you, madam chair. senator roberts, also. if you would answer this, farm economy continues to evolve in later discussion about prices in the months and years ahead. touch for us on how farm credits equipped to withstand the possible higher delinquency rate on loans while ensuring continued access to credit for rural america appeared rural america. what is the state rural america. what is the state of the fight, how sufficient capital of the system. share your thoughts about that if you would, mr. tonsager. >> if i could start with, i
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think there were lessons in the 1980s. in the 1970s, there were programs that allowed them to garner a lot of money. after that, the crisis of the 80s, the amount of debt leverage was dramatically reduced. so i think the system did a pretty decent job as did most lenders about not over leveraging credit to current borrowers. that is a big difference coming into the circumstances we are brain. it's about $50 billion worth of capital in the farm credit system and about $250 billion worth of love. the total beverage is about 16%, which is a strong position to be in overall for the position of the systems. i think that again as i mentioned earlier, the ability of working with people on how they borrow money and how they work through their challenges is fundamentally different than it was previously. there's a lot of relationship
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lending dad with the engagement as part of that. i think it is incumbent on the agency to be diligent and very closely watching the system has evolved. as chairman spearman said, it is excellent still. that is being repaid, very those made for allowances for losses at this point. but that can change quickly as we go into these coming years. so what is necessary to book for that. i think it is going to be our balancing act as an agency how hard we price the system i'm working with producers, you know, whether we stress the safety and soundness of the system or the safety and soundness of producers. i think we have to keep learning. we have to diligently watch the situation involved and watch what the system doesn't help working with producers. >> i think obviously if we
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learned anything from 2008, it is the importance of capital and abyssinian friday and farm credit and the nation's major financial institutions. let me shift for all three of you to answer this if you would. there has been increasing interest in my state, especially in the city of oakland, cleveland, in places like senator saban now's detroit and my large urban areas and the userland. d.c. farm credit institutions involved in these areas were to redo do to ensure that these have access to credit? >> particularly in the interest of mine, the issues were being discussed. the entrée into urban
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agriculture, the way i look at it is your expanding the pie. i think it helps the system grow by getting more directly involved with urban agriculture. as my colleague mentioned, he visited a place in texas and i also went to a place in texas where i saw a young farmer there who started out in his backyard with a garden and now through the help of the system, he has 200 acres and he's involved in the crs program and he also, one of its major customers is whole foods. getting out and seeing what is actually happening in the field is sent and that i hold near and dear. i would like to see more of it. >> any additional thoughts on
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that? >> just a couple comments. individual institutions include this in the regular business planning and we examined to that. in addition to that, many institutions have local coordinators where they work with people within the system to help support the local foods. >> mr. tonsager. >> yes, we are very much focused on the producer side of this. usda, marketing service and other agencies provide a lot of free services to the co-ops and the groups to establish the market. the system is working closely with them to make sure there's a flow of product. >> i understand. you are obviously more goal oriented than urban oriented. my city of cleveland, dear i was born, about 950,000. today it is under 400. there are lots of opportunities for rural agriculture that people are taking advantage of.
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there's a lot of trendy new restaurant, that want to sourced locally. i just ask all three of you to always be aware of that as a relatively part of your portfolio in the crucial area to the things you all three believe in. thank you. >> i guess i'm the only one at the table now. last night first of all, even though chairman roberts isn't here, i think it is very good for all of that is to say it is. her. oversight hearings to have. particularly with regulators to be effect rudely enforcing our rules and regulations that are designed to preserve an important system for agriculture and particularly, this hearing is appropriate because of the
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price of maybe i shouldn't be all agriculture projects, but at least an iota for such a corner with the production of those across the productions. we cannot people keep the system very sound. i don't expect all of you to get in. how detailed are the audits of the farm credit administration performed? if not, does the farm credit administration randomly picked different loan portfolios and examine them line by line to see what is being reported with the actual risk, or are they audit under 30,000 vote level in the nature of looking at totals and final projections. >> great question, senator.
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i would say at the top of my head it is all three. the primary focus of examinations are risk-based. we will see where could the system be in more jeopardy of not remaining safe and sound. each institution is examined once every 18 months. a report is issued once every eight months. but examinations can be ongoing all year. i'm the one bank where we see the most risk is examined once a year. so these reports are issued once a year on that institution. so that is pretty much the approach that we take. >> you wanted to say some thing. >> i would like to add to it the examiners are well-trained and
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it took years of training involved with them. the data comes from each institution all the time so we have an ongoing look at the system's progress. each of duchenne by statute must be done every 18 months. we sat down and have gone through with an examiner demonstrating what they go through. the examination process, each examiner reports to the boards of directors of each institution privately at the end of the examination to make sure the board of directors are well aware. it is very, very thorough. >> i gave two alternatives. would it be a sin nature answering my question that you randomly pick your own portfolios and examine line by line to see if what is being reported matches up with the actual risk. that's the way it's done? >> it is planned. >> okay. now, second question, has the farm credit administration ever
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required an institution to divest a law that was not appropriate to the mission of the farm credit system? >> yes, sir. it has. there have been and consists at the ica has taken corrective action and asked for an institution to actually divest or mechanic a few specifics but that is happening. >> my last question before i asked the question, i hope i am right. armed credit lenders cannot take deposits, for many advertised the ability of members to quote advance conditional. one of these accounts has an online advertisement that as of yesterday stated a person could quote, earn interest without tying up your funds. quote again, another one easy access. your funds are always available to you.
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go online and use the phone, end quote. complete liquidity contrary to cds, end of quote. those are online advertisement. so could you explain how these accounts are any different from checking or savings accounts? these farm credit accounts seem to function exactly like checking and savings accounts based upon the way that they are being marketed. >> senator, these accounts are not checking accounts. this particular procedure is allowed for under the act and they are actually pre-payment or draft accounts where borrowers from the system can put system can put funds into pay the loan down. >> then, you are telling me -- i think you just told me that they are not like checking and savings accounts, even though
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the advertisement online seem to lead people to believe that. >> i would have to see the advertisement. but they are not checking accounts. >> senator, they are not insured by the federal deposit corporation. they are at risk and that's funds are simply accounts that allow producers with long-term credits to build up and put their payment still available. >> mr. chairman, i've asked the questions i have to ask this panel. just in case i don't get back since we've got more votes, in case i don't get back for the other -- the other panel, i have a constituent here from all wind, iowa. i would like to ask a couple questions if i don't get that. >> i would be delighted. >> thank you. senator called the chart.
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>> thank you to all of you. mr. tonsager, we know how important credit is to rural america, loan guarantees, other financial tools offered by the farm credit system as well as commercial community and foreign banks. we know that he showed the lenders provide about 40% of all farm that, whether it's financing for farm real estate or for farm production. often the commercial community works together on dallas for the benefit and producers and at other times farm credit banks provide loans that are non-ag loans. i've heard from a lot of our small banks from minnesota that they believe there's an unfair advantage here because of how that is being handled. could you explain what is happening in your view on this? there's a couple things took an editor.
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so when the farm credit system has gone into an individual producer, if that producer is a full-time farmer, the system can blend for all the credit needs, including if he establishes other businesses. we have had some cases where farmers may choose to put up another business of some kind and they are about a statute to use the funds from the system for that purpose. and so, it appears to some people as if we are landing directly to those businesses. that is one key element that we run into from time to time about concern on that matter. >> one thing that is always true in agriculture is that the price of commodities is changing and that is why you want to make sure that end-users can safely use future options democrats in issues with this and rural america. it is also a reason why providing credit is complicated. about 10 years ago or grain elevator operators were facing a
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big margin calls, as you know. two years ago we saw price volatility in the spine market resulting in about 300 to 350 million. what role does the farm credit system make when his volatility in commodity prices? >> i think the tenure system was able to help address the challenge for producers and was able to fund several billion dollars to meet the margin calls, primarily in grain elevators, which has been a huge price increase less than 10 years ago i suppose. it has been a huge price increase in a very large crop so it's able to meet those needs. >> mr. hall, with experience in farming yourself, do you think the farm credit system is prepared to handle volatility and agricultural markets and how is the current market situation similar to those that occurred
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in 07 and 08, or how is it different? >> i think there's a lot of similarities. the system is prepared and we want to make sure they are prepared as we go into more periods of volatility. i'll go back even to the 1980s. the difference between now and then as the cost of money. a lot of the farm income is going to pay off debt. farmers had paid down debt going into this current. and i think with lower interest rates are going to be able to work their way through it. i don't see a comparison to the 80s, but i do see volatility and bigger challenges for producers which present challenges to the system and examiners and regulators. >> mr. spearman, do you want to add anything about the volatility markets and higher things aren't credit is prepared to handle that? >> as my two colleagues have said, the system is well positioned in a strong capital position, strong earnings if you
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will. it is a lot different. i think that during the 80s there were issues with the land or property had been borrowed on unfavorable underrating and that can have good been here five more modern and a lot more favorable. so there is a lot going on today that just did not exist at that time. >> i know in your testimony you talk about reforms that have been made after the agricultural credit crisis in the 1980s and that those reforms came about because of that crisis. do you think that there is a reason to make more reforms to the system now?
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>> at this point i don't. it would be our position as the regulatory agency to propose a new reforms. they think as a result of those things, things like restructuring the system has made it much more efficient and better able to preserve needs and the lending was an important tool of the committee approved an order to diversify the system to help farmers ultimately making sure there's money of capital and credit available. >> thank you very much. >> i think the senator for her questions. i conclude the hearing. thank you for appearing before the committee to discuss the state of credit in farm country and the role of the farm credit administration ensuring our system as those found in operating within the bounds as statute. to my fellow members, we would
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ask any additional questions that you may have for the record be submitted to the committee of five business days from today or by 5:00 next thursday, may may 26th. we would now like to invite the second panel of witnesses to come to the table.
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>> next time a supreme court justice clarence thomas delivered the commencement address at hotel college -- hillsdale college in michigan. he chats about his relationship with antonin scalia. this is about half an hour. i'm not -- [applause] >> thank you, all. thank you. thank you. thank you. thank you, all. dr. arun, chairman brought back, members of the board, members of the faculty, family, friends,
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most of all graduates, i am honored to be here. i am particularly honored as my brightest with me and we spend quite a bit of time together and we would like, i think, to have memories together. this indeed is a memory. again, i would like to thank dr. arun for inviting me. again, i express my deep honor and gratitude to participate in these commencement exercises. it has been quite some years since virginia and i have been here together. we have been here on separate occasions, but rarely together. of course we have known dr. larry and mrs. penny iron for many, many years as he has indicated. and we have been quite close to hillsdale throughout his tenure.
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we both admire the work that is being done here to educate young men and young women. i was fortunate to have had david morale, a hillsdale graduate clerk for me a few years back. he was an outstanding law clerk and a wonderful, brilliant young man. he is also one of my daily mass companions. i also had a chance last evening to visit with the young students who attend said in a class academy in my hometown, savanna, georgia. what a wonderful idea. this is the very same school that i attended high school in in the 1960s. this has been the most difficult term. this difficulty is underscored
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by the sudden and tragic passing of my colleague and friend, justice antonin scalia. i think it is fitting to say a few words about him, particularly here. many will focus on as an elective legal prowess. i will not do near it in either case, that there is so much more to the man than that. what i think i've justice scalia, i think of the good man whom i could think of the trust during my first days on the court and those are challenging days. he was in the tradition of this of my youth, a man of his word, a man of character. over the almost 25 years that we were together, i think we made the court a better place for each other.
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[applause] i certainly know that he made it a better place for me. he was kind to me when it mattered most in those early days. he is and will be sorely missed. as the years since i attended college age turns a half-century, i feel a bit out of place talking with college students or recent graduates. much has changed since i left college in 1971, things that were once considered firm it is now firmly established.
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hallmarks of my youth such as patriotism and religion seem more like outliers if not afterthought. i feel woefully out of place for any commencement. my words will perhaps be more of a vintage nature than currently -- been current in content. words actually matter, not a current newspeak. i admit to being on a potted jealously -- on a potted jealously catholic indic constitutionalist. [applause] in my youth, we had a small farm. i am convinced that the time i
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spent there had much to do with my firm resolve to never farm again. work seemed to spring eternal, like the weeds that consumes so much of our time and our lives and our efforts. one of the constantly conveyed messages was our obligation to take care of the land into use it to produce food for ourselves and for others. if there was to be independence, self-sufficiency for freedom, then we have to first understand , accept and discharge our responsibilities. the latter was a necessary, but not always sufficient antecedents are per cursors of the former. the only guarantee was that if
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you did not discharge your responsibilities, there could be no independence, no self-sufficiency, no freedom, no props. in a broader context, we were obligated in our neighborhood to be good neighbors so that the neighborhood with drive. whether there was to be a clean driving neighborhood was directly connected to our efforts and to work on that. so there is always through our way of thinking a connection and a relationship between the things we value most and our personal obligations are after is. there could be no freedom without each of us, discharging their responsibilities that is first and foremost. in that context, when we heard
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the words duty, honor, kind sure he, no more needed to be said. but that is a bygone era. today we rarely hear of our personal responsibilities and discussions of broad notions such as freedom or liberty. it is as though freedom and liberty exist, wholly independent of anything we do. seemingly, it is our version of predestination or as my grandfather often warned us. money didn't grow on trees. their existence continuing is independent of our content.
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in fact, this area is one in which any difference or any. we all deserve the same reward and notwithstanding the differences in our efforts. it is no wonder then we hear so often what is deserved or to what one is entitled and i guess by this reasoning, the student who took full advantage of all the spring break is apparently entitled to the same success as the conscientious classmate to work and studied while he played. perhaps we should redistribute the conscientious student grades to make the frolicking classmate his or

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